Tonight's news is predicting that 2011 will be hit very hard by increased foreclosures, quoting stats from RealtyTrac.

Asked by Jeanne Feenick, Basking Ridge, NJ Thu Jan 13, 2011

...and a further prediction that home prices could fall another 5% on average nationally. What are your thoughts?

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55
Mary Petti, Agent, Edison, NJ
Mon Jan 24, 2011
Jeanne,

I do believe there will be a lot more foreclosures since, as someone already noted, a lot of those ARMs are coming due.
However, I also believe that the "national" averages have nothing to do with our (very) local markets (to a point). This type of negative information only causes further reluctance and hesitance in buyers, as well as creates an unnecessary feeling of uneasiness (to say the least) in both buyers and sellers. only furthering the decline in some areas, and helping others that were doing OK to decline as well.

States like Florida, Nevada, Arizona, and Colorado etc whose foreclosure rates are over the top, obviously contribute to, and skew, the numbers for those "national averages", (but they do represent what is happening all over the country) .

Additionally, Case-Schiller makes their predictions (and post their historical data), and people take is as gospel. However, IMHO, they aren't the be all to end all either. Case-Schiller uses MSA's as their basis for home statistics. If you aren't aware of what an MSA is it's a Metropolitan Statistical Area based on census, and the area delineations come from the federal OMB (Office of Management and Budget). Their numbers may be "correct" for the particular MSA, but again, they aren't always correct for the local markets.

As defined:
The metropolitan area is defined by the U.S. Office of Management and Budget as the New York-Northern New Jersey-Long Island, and the New York-New Jersey-Pennsylvania Metropolitan Statistical Area (MSA), with an estimated population of 19,069,796 (roughly 1 in 16 Americans) as of 2009.

The MSA is further subdivided into four metropolitan divisions:
1) The 23-county metropolitan area includes ten counties in New York State (those coinciding with the five boroughs of New York City;
2) The two counties of Long Island, and three counties in the lower Hudson Valley);
3) 12 counties in Northern and Central New Jersey;
4) and one county in northeastern Pennsylvania.

The Edison-New Brunswick, NJ "MSA" includes Middlesex, Monmouth, Somerset and Ocean Counties (with an estimated population of a little over 2.3 million people).

The Newark-Union NJ "MSA" includes Union, Morris, Sussex, and Hunterdon counties in NJ, AND Pike County in PA (with a little over 2.1 million people).

As you can see, both MSA sub-divisions include towns in each county that have had, and probably will continue to have, a higher amount of short sales and foreclosures than others, thereby skewing the reported numbers again.

Do I think we have seen the end of this , no not really, but we as RE professionals have to keep close tabs on our local markets and NOT allow the public to believe everything they read and hear in the media. It's bad for our economy and bad for business.
2 votes
Linda S. Cef…, Agent, Franklin, WI
Fri Jan 21, 2011
Joan,

I do agree with some of what George said and believe he made some valid points. But I was responding directly to the comment on Buffini. I remember him saying that we are in for a long ride back 2006-2007. He warned us what would happen and it did. He did not ever sugar coat anything. In fact, when other "economists" were saying this would take at least 8-15 months for the market to correct. Buffini was saying, not so. He warned us that this would go well into 2010 and possibly longer. Guess he right on that prediction.

The point he made is that we have had horrible markets in the past and there are some things that we as agents can do to get through and be successful - even in a down time.

This time our responses are not as a direct result of or answer to a buyer or seller asking our advice. Instead it is in response to something Jeanne heard quoting stats from RealtyTrac. And I think we all understand what George is saying :)

I also happen to be closely related to a very successful builder in my area and they are hearing the same thing in regards to John Walin's comment on "pent up demand." Many people have been waiting in the weeds so to speak to make their move. The builders have had to come up with new proto types. Downsizing from the mansion like homes that look huge from the outside, but much wasted space on the inside.

I don't believe that anyone is in a position to make any kind of prediction right now. And it matters none to me what kind of experience or degrees they carry. I believe that some areas are still falling; some have a way to go and some have stabilized and actually started to improve.
Web Reference:  http://www.lindacefalu.com
2 votes
Geo Gervasi, , Millington, NJ
Mon Jan 17, 2011
Jerry it is refreshing to actually connect with another re associate who thinks and believe as I do. Your words regarding homeownership and the all the associated costs (financially, emotionally and socially) are so spot on, and truthfully. I am impressed. Because it seems that the majority of re professionals do not explore or acknowledge the in-depth socio-economic aspects of buying and selling real estate. All I seem to hear and read is crafted script from (what I have deemed the RE Cheerleading Squads) about how ITS always a great time to buy, and buy and buy and buy, this talking point, that talking point, etc. Most always 'selling' no matter what is actually going on in the real world.

The apparent ignoring of data, facts and conditions that have a real effect on everyone, yet just choosing to mostly ignore it. I think of myself as a realist in real estate, not many of us here! I'm a stats guy, give me hard verifiable data- that I can breakdown and analyze. Seems there are very few of us out there... ; P

I happen to agree with you 100% on the market decline, it is the BEST thing to happen to the housing market indeed. In fact I would like to see prices and values come down another 25% statewide. When you use the rent to income ratio, you can readily see how most homes are over valued and over priced. As you stated, having to work multiple jobs just to keep your head above water is counter-productive to enjoying a decent quality of life.

But of course throughout most of NJ, the many years and years of hyperbole attached to countless communities have distorted the values and cost-benefits of living and owning a home here. It's always the same old, same old, tired and somewhat embellished argument of "great school system, great services, great this, great that" Blah, blah, blah. You'd think that each and every town that preaches this mantra has the BEST school system in the state, the lowest crime, the best services, etc. Insinuating that anywhere else is sub-par.

You'd almost believe that NJ is by far and away a better place to live and work than almost any other state in the union. It is often unbelievable and sometimes exaggerated praise. While NJ does have some very good school systems, good safe towns and cities to live in, NJ is not the be all to end all places to live. There are 49 other states and hundreds of thousands of towns, many of which have good schools and services as well, with reasonable taxes and home prices! Go figure...

But here is a bit of reality that rarely gets talked about in the RE business.
NJ has the HIGHEST tax burden in the nation. NJ has the second highest property taxes in the nation. NJ is the MOST unfriendly state to small businesses and NJ is in the top 10 of most corrupt states in the nation. Funny how these truths and facts never get mentioned so much, eh? Yes, we are close to NYC, for jobs, and amenities, we have excellent beaches, beautiful mountains and so on. But the affordability ratio is not conducive to owning and maintaining a home here in the Garden State.

So, the often irrational justification for paying over and above most other states and areas for a home, clearly becomes an invalid argument when you compare economic facts and weigh the cost-benefit ratios of over paying for a home and over paying on the property taxes. Which in turn negatively affects the rental market, by putting a lot of residential dwellings out of reach, either for rent or for purchase for families earning a bit below the state household median income of 50k.

Corruption plays a big part as to why things are so skewed here in NJ. The property tax issue is at the forefront and needs serious addressing. Funding our public school systems with 70% to 76% of PT's is unsustainable, unfair and unjustified. I just hope that Christie implements real change and not just applies a a temporary band aid. Along with the much needed Pension reform and general clean up of the political landscape.

Good luck tackling the 2012 forecast Jerry I look forward to reading it. A little regression analysis should help, but you're going to definitely need some reliable data on the labor market for sure. That is the key to recovery and success, no doubt. With food, and fuel rising and the possibility of inflation, up against flat to negative wages, the cost of living is only going to increase for the majority of working class residents in NJ.

The Pension system is going to break the backs of the working class and there will be more residents on the welfare dole. If the unemployment does not significantly drop, then 2012 won't be the silver lining most are hoping for and speaking about. There are numerous factors in play and we are in a very delicate cycle for the next 12 months. Let's hope for some slight improvements along the way!
2 votes
Jerry Barker, Agent, Atlantic City, NJ
Sun Jan 16, 2011
Thank you George, I am already planning my 2012 Real Estate Outlook, I think the big issues that I am going to have to touch on will be the unemployment rates, and the large gap between the cost of living and the median household income thresholds in NJ. I wish people would stop calling the price decline "gloom and doom" it really is the best thing that could happen to Americans. We should all be able to afford homes without being financially and emotionally drained and we should never have to be a slave just to make the mortgage payments, whats the point in working two or three jobs just to make the monthly mortgage payment on the property, when would you have time to enjoy the property if you worked that much just to afford it?
Web Reference:  http://www.sjrates.com
2 votes
Ruth and Per…, Agent, Los Gatos, CA
Sat Jan 15, 2011
Hi Jeanne

This has been forecast by most major economists at the end of 2010, numbers of 5% are quite common.
Some area will be hard hit and some wont.

I understand New Jersey has an unreleased inventory of a 100,000 homes.

Banks such as B of A are sitting on $1B in inventory.

Good luck.
Perry
2 votes
Derek W, Agent, Mount Vernon, NY
Fri Jan 14, 2011
51% of the foreclosure activity in 2010 occurred in 5 states; California, Florida, Arizona, Illinois and Michigan, as reported by Realty Trac, and all indicators point in the direction that the shadow inventories of foreclosed homes is expected to increase foreclosure filings in 2011 as high as 15%. None of these top 5 states have been able to stop the rate of foreclosures or appear to have any answer. On the ground, I will also tell you that realtor's are competing with short sales and not having great success with sales conversions and prices continue to decline.

We have also seen the commercial market taking a hit with hotels, investment properties and malls also coming up for foreclosure. All this data points us in the the direction that all areas of the real sector will find 2011 a much tougher year than 2010. Of course there will be small pockets of victories but these will do nothing to reduce the tide of foreclosures.


http://www.foreclosurecourt.org
2 votes
Doc & Ellen…, Agent, San Antonio, TX
Thu Jan 13, 2011
I don't wish to slander anyone, but many so-called foreclosure experts have a reputation for bogus numbers. They are in the bad news business. My experience is that they are usually way off the mark. If you want to see how your market is faring, ask your local lenders how their REO portfolios look - they know. find out what your local absorption rate is, and check with your county tax records to see how many are lender owned.

There is no National Real Estate Market - ALL Real Estate is very local. No one buys or sells an average home. So, get local. Forget the national bad news boys. Agents who know their markets intimately are going to do very well in 2011.

Doc
Web Reference:  http://TellEllen.com
2 votes
Joseph Crifa…, Agent, Ridgewood, NY
Tue Feb 15, 2011
Our market area has not really been affected by short sales and foreclosures. Therefore buyers and sellers should research their market before assuming that this information pertaines to them. I would say foreclosures and short sales accounted for less than 5% of the current sales in the Middle Village, Maspeth, Ridgewood, Glendale, Williamsburg, Greepoint NY area.
1 vote
Jeanne Feeni…, Agent, Basking Ridge, NJ
Tue Feb 15, 2011
Well put SuZ. One of the points I made to this particular seller was that shifting from a market impacted more heavily by distressed sales - with the situation seemingly growing, not receding - and moving into a makret that is less impacted, could be a good long term play.

But you know how it goes - people so often want the best outcome on both sides of the equation, but in today's market that is not often the case. But I believe therein lies the opportunity for those sellers and buyers who grasp it, and seize it.

Thanks all for your input - timely topic and I enjoy - as I hope other readers do - hearing the perspective of agents from around the country.

Best,
Jeannie
Web Reference:  http://www.feenick.com
1 vote
Mary Petti, Agent, Edison, NJ
Wed Feb 9, 2011
I just read and posted an abbreviated form the article below last week. Though not all good news, it certainly is more positive than the gloom and doom purveyors. Increased manufacturing, spending & home purchases, and decreased unemployment claims (both new and existing) will translate to better homes sales (and perhaps buyers getting off the fence since good economic news translates to creeping up of interest rates). Lets' hope the "good" news continues, even if it's in small baby steps.
As in my previous post, I belive that it's all really local, so we should all be ready for those buyers.

Here's the article:
Initial claims for unemployment benefits FELL by 42,000 to 415,000 for the week ending January 29. Continuing claims for the week ending January 22 fell by 84,000 to 3.9 million.
The unemployment rate FELL to 9% in January from 9.4% in December.

The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending January 28 ROSE 11.3%.
Refinancing applications increased 11.7%.
Purchase volume ROSE 9.5%.

The Institute for Supply Management reported that the monthly composite index of manufacturing activity ROSE to 60.8 in January after reaching a revised 58.5 in December. A reading above 50 signals expansion. It was the 18th straight month of expansion and the highest reading since May 2004.

Factory orders ROSE 0.2% in December to a seasonally adjusted $426.8 billion, following a revised 1.3% increase in November. Excluding the volatile transportation sector, orders ROSE 1.7%.

The Institute for Supply Management reported that the monthly composite index of non-manufacturing activity ROSE to 59.4 in January from 57.1 in December. A reading above 50 signals expansion. It was the 13th straight month of expansion in the services sector and the fastest pace since August 2005.

Total construction spending fell 2.5% to $787.9 billion in December, following a 0.4% increase in November. Economists had anticipated an increase of 0.2% in December.

Retail sales fell 1% for the week ending January 29, according to the ICSC-Goldman Sachs index. On a year-over-year basis, retailers saw sales INCREASE 1.6%.
1 vote
Suz A, Agent, Longmont, CO
Tue Feb 8, 2011
Hello Jeanne!

The elephant in the room is the "shadow inventory" - the 2 million or more homes that are delinquent on mortgages. That dark cloud has a dark lining. The Los Angeles Times reported in recent weeks that banks are looking to unload some non-performing assets that are on their books.

The banks are ill-served to swamp the market. Employing yet another metaphor, it makes sense to boil the frog slowly (so he doesn't notice until it's too late). So, the banks won't be sweeping all of their holdings into the market this year. They'll have to do more stockpiling.

Sellers are hunkering down. They must believe better days are ahead because they aren't adding to the inventory.

Meanwhile, buyers are content to sit on the sidelines. Fearful of buying a declining asset, the fence sitters who were not spurred by interest rates may still be hanging around waiting for stability. Talk of ending the mortgage tax deduction isn't helping.

And, builders are building fewer and fewer homes.

Taken together, these different forces resemble a pair of fighters sizing up one another. Nothing is happening. Actually, a slow deterioration is taking place. Detroit buil-dozed homes last year. Neighbors have been mowing and watering lawns. I'm sure the banks would like to move on to profitable activities. Home owner associations would like them to move on, too.

The pressure is on the banks. The banks are taking an image beating thanks to the constant parade of headlines, books and now an award winning movie ("Inside Job"). Normal operations seem a distant possibility if it will ever come for some of them.

There has been at least one report of a big bank reducing principal for mortgage. modifications. Along with the federal government's unsuccessful HAMP program, this new development may not put a dent in the coming wave of foreclosures. They all need to do it.

The picture is not entirely dark. The slowed new home building and a sudden pick up in hiring could brighten things. Some have even predicted a housing shortage for this year.

I'm not going to bet the farm on a recovery before 2013. I will be ready, if buying suddenly picks up. But, I expect that until modifications become a reality, and hiring starts in earnest, the market is going to remain pretty much the same this year, possibly picking up a larger inventory. Agree: Values may slip that 5 percent.

Best,
SuZ
PML property movers of Longmont, CO
1 vote
Lisa Fitzsim…, Agent, Vernon, NJ
Tue Feb 8, 2011
Great responses...too many to read them all. My only input would be regarding the shadow market and that I recenlty read (NJAR) that it's estimated to take 4 years to clear was presently hiding there. Again, real estate being local, I can speak for the many homes in Sussex/Warren/Passaic/Morris counties I've seen not sell at short-sale, expire and now sit in limbo waiting not to be purchased at a sheriff sale then re-list as REO. We aint outta the woods yet.
BUT, I have noticed an increase in agents being more informed & educated on how to approach their sellers and the lienholders regarding the short-sale situation. If the seller isn't willing and able to do what's necessary on their end in the beginning, you know you're in for a longer-than-necessary haul. Gool luck to you all!
1 vote
Jeremy Gulish, Agent, Morristown, NJ
Thu Jan 27, 2011
I actually don't think this is necessarily far off. We may continue to have an increase in foreclosures as job numbers still are refusing to improve, that being said the foreclosures tend to be significantly below the average list/sales price compared to non-foreclosure/short sale homes. These foreclosures may continue to be the Achilles heel to home prices. Until job numbers improve the housing market will stay flat. I think it will be another year until we start seeing significant improvements to the housing market.
1 vote
Jim Ghigo, Agent, Peoria, AZ
Wed Jan 26, 2011
Increased number of foreclosures? Yes
Decreased property value? Slight: not enough to make a difference. Barely recognizable
Hard? Not if you are a buyer
1 vote
Aaron Catt, Agent, Meridian, ID
Tue Jan 25, 2011
My 2 cents--

The words "average" and "Nationally" immediately raise suspicion.

I think that if I were looking "nationally" for "average" real estate then I might have a reason to be concerned with the data and pay closer attention.

But, since I shop locally for opportunities that meet my wants and needs, I have no reason to be concerned--coupled with the fact that I need a roof over my head no matter what the market does.
1 vote
Wes Black, Agent, Louisville, KY
Tue Jan 25, 2011
The Louisville market also has its fair shares of foreclosures that will add to the total inventory of homes on hand. Compared to other states we are in much better shape. Our home prices are expected to fall in the range of 3 % or so this year. Hopefully rates will remain low and consumer sentiment will improve so more people feel good about spending money. There are funds in our city for mortgage loans for the well qualified.
1 vote
Minna Reid, Agent, Trumbull, CT
Tue Jan 25, 2011
I would tend to agree with this. There is too much overinflated inventory left to clear to reach any bottom very soon. The fact that unemployment is still way too high will not move more buyers to buy but will move more sellers to foreclose. We still have a huge supply and demand problem that will probably take a few more years to correct.
Web Reference:  http://www.homesbyminna.com
1 vote
Laura Moore, Agent, McQueeney, TX
Mon Jan 24, 2011
I think as long as there is a high unemployment rate, home sales will be slow and foreclosures will be high causing the market to fall. I think they go hand in hand. Watch those numbers in your area.
1 vote
Laurie Rosen…, , Newburgh, IN
Mon Jan 24, 2011
I believe that the home prices are affected differently in each area. For instance, in my area, Evansville, Indiana, home sales are increasing as well as home prices. There might be more forclosures just because they are taking a lot longer but I think the market is increasing in sales price and sales volume in my area
1 vote
John Walin, Agent, Libertyville, IL
Mon Jan 24, 2011
The first round of foreclosures were legitimate, people lost jobs, got divorced, had an adjutable rate loan and couldnt refi when the appraisal came in kind of situations and legitimately could not afford the house, given their circumstances. The next round we are seeing now is people just being ticked that there house isn't worth what they paid and want to get out of the house they CAN afford but want to wash their hair of the home. This strategic foreclosure, buy and bail thing is coming up more and more and I hate it. Well off people trying to figure a way to get "we the people" to bail them out of that last refi or use this market as a way to cash out, rent and not wait for the market to stabilize. I sincerely hope the banks force the hardship issue and make people that do not have a hardship bring money to close.
1 vote
Alan Cobb, Agent, Littleton, CO
Sat Jan 22, 2011
Colorado has been ahead of the national curve with foreclosures. Colorado is well positioned to be ahead of the curve in terms of decreasing foreclosure activity which will limit further downward price pressure. There is some risk that current bank owned properties are not yet on the market.
1 vote
Jeanne Feeni…, Agent, Basking Ridge, NJ
Sat Jan 22, 2011
More good input, thanks to all for contributing. To Dan, thanks for drawing some of the Zillow content over. Before I "found" Trulia, I was on Zillow - a bit. I agree that a balanced view and by that I mean a realistic one is best, but I did not find that there. Too much negativity is a killer, similar to blind zeal. I've lost my share of business due to honesty and realistic predictions, but I stick with them. Sure there are negatives at play, and that makes the market - and our jobs - more challenging. That's where we are, that's the market we are in, and I see my job as helping people sell and buy real estate when they are ready. I'm not pushing anyone to participate, but the fact is that the buying and selling of homes is part of what makes the world go round. When my clients are ready and have a need or desire to sell or buy, I commit t to understanding the landscape and advising them well.

Keep it coming, I'm enjoying the exchange.

Best,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
1 vote
Jerry Barker, Agent, Atlantic City, NJ
Fri Jan 21, 2011
All the Arms that were issued in the previous decade are all coming due this decade, 2010-2020 is going to be flooded with foreclosures and short sales in my opinion. Thats not counting all the other forms of toxic mortgages that might be going belly up, the arms are just the only ones that can be mathamatically calculated and counted on for example, the 3 year arms from 2008, the 5 year arms from 2006, the 7 year arms from 2004 and the 10 year arms from 2001 all come dues this year, most will go belly up after the payments become unaffordable to the home owners and will sell as foreclosed home between the years 2012-2015, now think about all the arms that were issued each year between 2000 and 2010, thats alot of inventory, and thats why I think it will pull down home values for the next ten years in my opinion, well just one of my reasons anyway. I do strongly believe that home values will return to were they were around the the end of the last century because the median house hold incomes are about the same as they were back then and thats the last time we had a real balanced market.
Web Reference:  http://www.sjrates.com
1 vote
Catherine "C…, Agent, Metuchen, NJ
Fri Jan 21, 2011
Hi Jeanne,

Good question, I am surprised I missed it...a lot of answers...so I might just be repeating what has been said...sorry in advance. Please note that I am only speaking about New Jersey real estate.

IMO in New Jersey we are going to see this year the largest amount of already foreclosed homes hitting the market. If I remember correctly from the last article in the NYtimes I read on the matter 1 month ago they were saying that NJ has the largest shadow inventory with now probably over 100,000 foreclosed homes ready to come on the market at anytime...Robot signing and other not so "best practices" are putting pressure on lenders to put a hold on releasing some of those foreclosed homes but it is coming....

In most of the local areas here in Middlesex County we are already having close to 1 year of Inventory.

At the end it comes down to supply/demand 101. Way too much supply and very few buyers willing and able. In this context the pressure on prices is downward..

Fundamentals such as job growth are looking very pale today and in the near future...thus we should not expect much more increase in buyers. It would take about 20 years to retrieve all the jobs loss in 2008 and 2009 based on 2010 job growth in NJ

Just my 2 cents...
1 vote
Joan Braunsc…, , Morris County, NJ
Fri Jan 21, 2011
John, no offense but Buffini is in the business of coaching RE agents how to build up business through referrals and whatever systems he wants to sell you. He is very rah rah because that is how he makes money.
His expertise has nothing to do with economics and everything to do with how to build his own business.

I mean, no new construction for the past 5 years??? How do you define no new construction? Can anybody here, anybody, actually state that they have seen no new construction in that time?
Pent up demand? Say what?! Lowest interest rates in history, huge inventory and lower prices have still not brought buyers out in droves. Maybe its because people don't have jobs. Or are underemployed. Or aren't sure when they will be layed off. Or when they will have to relocate. Or they don't know if housing prices are going to continue to decline over the next few years because frankly so many indicators are saying they will.
Family sizing? Again, say what?! What would that have to do with housing recovery?
Foreclosures clearing up in 2011? Not sure where he got his info but that is not what I've heard.

Man, if everything could be as simple as Buffini makes it how wonderful, rainbow and roses, life would be.

But the rest of us mortals have to deal with reality.
1 vote
Jerry Barker, Agent, Atlantic City, NJ
Tue Jan 18, 2011
George, I couldn't have said it better myself, in fact I wish I was able to express myself in words the way you can, I would be a great freelance writer. Well Jeanne what are your thoughts after reading all the responses and watching the news?
Web Reference:  http://www.sjrates.com
1 vote
Scott Godzyk, Agent, Manchester, NH
Sun Jan 16, 2011
There are many variables as it will depend in the state, the city/town, the neighbiorhood, the type of property and the condition of the property. ALthough foreclsoures are steady, the condition of them is getting worse and worse. Good quaility homes ar enot seeing as much of a price cut as homes that need a lot of repair. Here in NH we have seen teh total sales slightly down but the average sales price actually on the increase. The market is good, the unemployment rate is one of the lowest in the country. Areas that have not made a comeback yet will see a higher rate of decline than those that have made teh turn and are coming up.

Please see my blog with tips and advice on buying a bank owned home
1 vote
Geo Gervasi, , Millington, NJ
Sat Jan 15, 2011
Jerry Barker

Jerry;
Great article, just read it. You hit the nail on the head. You have done some good analysis there and provided solid insight as to the challenges and issues facing the real estate market in 2011 and beyond.
1 vote
Geo Gervasi, , Millington, NJ
Sat Jan 15, 2011
Jeanne, you are one of a few who does their homework and has a solid understanding of financial and economic markets and how they relate to real estate. Good point to raise.

The 5% price decline is only predicted by RealtyTrac. Meanwhile Professor Shiller of Case-Shiller, and Mark Zandi, who is one of the most respected economists in the industry, states it could be as much as another 20% price drop nationally. Now, those who scoff at national numbers simply do not have a good grasp of business cycles and how macro markets can and do indirectly affect micro markets- both positive and negative. In this case it will be negative. And the degree of negativity will vary from local market to local market, that much is true. I do not argue that markets vary from one local' to another.

But, with the continual shift in oversupply, prices will continue to drop. I'm not sure about some of the nay-sayers on here, but the correlation between supply and price is irrefutable. But maybe some missed that economics class. You have to look at the AD-AS model for a macroeconomic picture as well as the supply-demand model of microeconomics. Both play key roles in housing markets.

With a shortage of demand, prices cannot rise, period. This macro effect will eventually influence the economic forces on many micro markets. In the case of housing, the shift in demand is a direct result of the labor markets instability, both on local and national levels. Even as price curve moves to a lower point, absorption rates will not increase- because of the lack of purchasing power. Reduced or no jobs = little or no P-P.

This is not up for debate, these receivership numbers are credible. No one is creating 'bogus' numbers as suggested. 1 in 5 borrowers are delinquent to some extent. How many of those 1 in 5 do you actually think will recover and make up the arrears payments? And then stay current? How many do think will go into foreclosure? I'll be generous and give you a 95/5 ratio. But it's probably more like 99/1.

It amazes the rhetoric that is written by so-called local experts. These are the same so-called experts that said years ago, the housing bubble was over-blown by the media. The foreclosures debacle was over-blown by the media. The lack of information credibility in our industry is overwhelming, thanks in part to many who do not do any in-depth research, data mining and thoughtful analysis. Some do a good job, but many do not.

Funny how many of the local 'arm-wavers' have been mostly incorrect. I know, I know...you have been in real estate for (insert years: 15, 20, 25, 30...years and you have seen it all...and apparently, some seem to know it all. roll eyes) (But, apparently some really don't)

On the foreclosure front: In fact, the tide of foreclosures (shadow & undisclosed bank inventories) could be as high another 5 MILLION. Yes, 5 million. (Moody's Analytic's)

Real unemployment stands at 20.9% in the U.S. In NJ, it's hovering near 15%. Not the BS 9.1% the DoW&L reports. The conveniently leave out 1099/labor force drop-outs and part-timers) (as does the BLS)
It simply comes down to jobs and purchasing power. Yes, some market will see increased activity. Some will see a surge in sales. But the majority of regional and local markets will remain flat or decline.

Factors to consider will be, household wealth and savings, earning power, credit worthiness and the subsequent borrowing power. It's only a "good time to buy" for a certain segment of the public. An adequate DP, and the criteria mentioned above have to met. Convincing people to buy that do not have an acceptable DTI and stable employment is neither professional or honorable.

Yes, I believe that some of the more wealthier and affluent income brackets will probably buy in the coming year. I do think S/S's can help to plow through some of the built up inventory, but, banks have to cooperate. So far, they have not been playing nicely. Killing deals, delaying deals for seemingly, trivial reasons. I have dealt with Equator and Chase on a number of S/S's and REO's with extremely frustrating results.

But overall in NJ, the economic landscape is not improving. The pension system HAS to be reformed, hopefully Christie will keep his promise. We still have the highest tax burden in the nation. Property taxes have to dealt with. We have to lower them, not just cap them. It is out of control. As long as these major economic issues are not addressed and not reformed then most of NJ will not see healthy real estate markets for years to come. I simply do not get the argument that some have put forth.

Facts and figures (stemming from corruption and poor policies) have led us into this mess, thousands upon thousands of real people in NJ are out of work, thousands upon thousands have lost their homes. The only bogus thing is the denial of these facts and figures. But hey, some people believe what they choose to believe...damn the facts! ; )
1 vote
Marc Pollak, Agent, Basking Ridge, NJ
Fri Jan 14, 2011
It never ceases to amaze me that the only way to get people to watch the news is to preach the doom and gloom. My business is starting to rev up right now but that doesn't sell newspapers or advertising on the "News" programs.

Real Estate as so many have said is local. There will be some that fall by more than 5% and others that appreciate. Get with a good qualified realtor in your market, do the homework, run the comps and make smart purchases.

The other thing to look at is the rate of interest. That is going up. Do any of you really think it will come back down? A 1% change in the interest rate from what I understand is a equivelent to a 10% loss in purchasing power. So even if we have a 5% reduction in value you net out with a 5% benefit because of the lower interest rate on only a 1% increase.

Marc Pollak
Keller Williams
1 vote
Jerry Barker, Agent, Atlantic City, NJ
Fri Jan 14, 2011
I've also published a more local report on the 2011 real estate outlook at Patch.com if your interested, its linked here: http://galloway.patch.com/articles/real-estate-outlook-not-g…
1 vote
Teddy Sonner, Agent, Washington, DC
Fri Jan 14, 2011
That is possible of course because of the inventory of underwater mortgages. It's best if this inventory gets into the market and purchased by qualified home owners and investors. Until foreclosures get back to the levels they were before we will not be able to have a full recovery. All markets are different and within markets there are huge differences so looking at the big picture might not be as helpful for a buyer.
1 vote
Jerry Barker, Agent, Atlantic City, NJ
Fri Jan 14, 2011
I have been saying this for a long time, if youve read my 2011 real estate outlook I have already predicted this. It's not just 2011 either, its going to get worse for the next three years and then level out for about the next 6 years before we reach a normal market again, heres a link to that article: http://www.suite101.com/content/the-2011-real-estate-outlook…
Web Reference:  http://www.sjrates.com
1 vote
Lyle Wolf, Agent, Morristown, NJ
Thu Jan 13, 2011
While each local market is different, most of the national economic projections from economists at B of A, Moody's, S & P, Morgan Stanley, Case Shiller, etc. are projecting prices sliding another 5-10% in 2011. This is due to the huge shadow inventory of distressed properties which the banks will be releasing into the market in higher numbers this year and for the next 2+ years that will drag prices down and keep them down (we will not see Fall 2010 prices until 2013).
1 vote
Marsha Bowen…, Agent, Livingston, NJ
Thu Jan 13, 2011
I'm actually relieved that only a 5% decline is being predicted considering the number of foreclosures in the pipeline. We really need to see prices stabilize to turn this market around. I can only hope that the number of buyers in the market will continue increase to aid in this effort
1 vote
Linda S. Cef…, Agent, Franklin, WI
Thu Jan 13, 2011
I think the news has a way of causing some of the issues we are dealing with. I believe we will be looking at an increase in the number of foreclosures in the future. However, while that is happening, I am seeing an upswing in the market. While this time of yearly is typically busy for me, I am almost as busy as I was in 2004-2005.

There are areas in Wisconsin that are not only holding steady, but are also increasing a bit. In addition, there seems to be many more buyers that are more than qualified to buy. I believe I am witnessing a trend that is going to continue and therefore, eliminate much of the inventory. So, whether or not we are going to see a surge in foreclosures is not really as important to me as whether or not the current trend will continue in my market.

I also believe that many in the industry - whether it be a buyer, seller, agent or lender - are much better educated on the process of getting through the short sales and foreclosures which in turn is helping to move things along.

Just my thoughts.
Web Reference:  http://www.lindacefalu.com
1 vote
Jeanne Feeni…, Agent, Basking Ridge, NJ
Tue Feb 15, 2011
Hi James, have to agree with you on that - as a matter of fact, I am looking myself for compelling opportunities with solid rental prospects. Keep me in mind your way please. Here in NJ the cases are not as compelling, but elsewhere I think the numbers likely work better. As a matter of fact, my husband is on a plane to Phoenix now for other business, if you have something terrific to share, reach out to me, maybe he has some time...

Best,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Jim Ghigo, Agent, Peoria, AZ
Tue Feb 15, 2011
Perception is the key. This is merely a once in a lifetime opportunity to invest in real estate at the end of the rainbow. it is up to you. Half empty or abundantly overflowing?
0 votes
Suz A, Agent, Longmont, CO
Sat Feb 12, 2011
Hello again.

Thanks for sharing your story, Jeanne. We're all fond of reminding prospective sellers that real estate is local. It still is. Foreclosures are not having a uniform impact on the nation.

Colorado is one of the high foreclosure rate states - even as the state touts its stronger economy.

In the foreclosure states, the foreclosure inventory is keeping many buyers and sellers on the sidelines. If one thing is certain it is things change, and they can change rapidly.

Sellers should remember that if they plan to buy right away, there may be no advantage to postponing a sale. There is general agreement that a return to 2005 prices is a way off. If you sell and buy right away in the same general area, it should make little difference that we're in a down market, except that the buyer - especially a cash buyer - is at an advantage.

Selling in a stronger market and going to a weak one is ideal. My advice to sellers is to not try to time the market. Economies recover at different rates. Someone in one state that has a stronger economy can make out like a bandit by selling and then buying a state with a lagging economy. And, anything can happen to change the picture with hiring expected to pick up this year.

Best,
SuZ
PML property movers of Longmont
720 810 0683
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Feb 11, 2011
Very interesting update from a slice of my own market segment - Somerset County's North Plainfield, hit particularly hard by Somerset County standards by the distressed property scenario. Today I sat down with a seller I tried to help 2 years ago to consider listing again this Spring. When we last met, my recollection is that the proportion of distressed inventory to the total was around the 20-25% level. My calculation as of today was that 36% of the total active listing specified "lender approval required". And of the 6 properties that have gone under contract in the last 30 days, 3 - or 50% - were distressed sales.

Markets are surely local. I am certainly hopeful that the short sales/foreclosures will work their way through the system as quickly as possible so that this particular community can stabilize.

I continue to enjoy your responses!
Web Reference:  http://www.feenick.com
0 votes
Joseph Crifa…, Agent, Ridgewood, NY
Wed Jan 26, 2011
This information is based on a national forecast. You should be more concerned with regional and local data which directly affects your market area. Speak to your local realtor. They can provide you with this information.
0 votes
Bill Eckler, Agent, Venice, FL
Sat Jan 22, 2011
A glance at the growing number of "short sales" should clarify the direction we are heading.....any medical person understands that it's best to treat the cause and not the symptoms.....thus far, efforts taken have been of a symptomatic nature.

Bill
0 votes
Joan Braunsc…, , Morris County, NJ
Fri Jan 21, 2011
Linda, that's my point: Buffini has built up a great business by teaching common sense techniques that can help agents build their business. I'm not arguing that he is very good at what he does and that his techniques can be effective.
My issue is that he is not in the business of trying to sell anything but...well...how to sell yourself. That has virtually nothing to do with the realities that George brought up: the real effects of micro/macro economics on all facets of our lives, including real estate.

What Michael said "The problem with motivational speakers is they tell you what you want to hear, not what you need to hear." is so true (obviously they wouldn't bring a lot of people in to spend lots of money with downer predictions) and unfortunately, that applies to RE agents as well because so many have been telling people what they want to hear and not necessarily what they need to hear.

Yes, people will always buy and sell. There will always be business out there. Markets will fluctuate, confuse, confound and frustrate many who try to figure it out. I think as RE agents, we don't necessarily need to be experts in the economy, but we need to be knowledgable enough to understand at least the basics of what George was saying.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Fri Jan 21, 2011
Jeanne, you should have been over at zillow.

Looking over there you would have seen

House prices inflation adjusted still needing to go down more
http://www.multpl.com/case-shiller-home-price-index-inflatio…

The life cycle of a bubble with the end being below the start point
http://www.housepricecrash.co.uk/graphs-bubble-lifecycle.php

The federal reserve saying that house prices are to high and need to drop around 20% more. No pain free recovery here.
http://dallasfed.org/research/eclett/2010/el1014.html

Peter Schiff saying house prices need to drop 23% to reach the historical average price and could go even lower
http://www.businessinsider.com/peter-schiff-home-prices-2010…

Unfortunately on trulia no one is left who cares about real information like this.

A 5% drop? That is likely to be very optimistic.
0 votes
Suz A, Agent, Longmont, CO
Fri Jan 21, 2011
OK, Brian Buffini can read. Brian Westbury, chief economist at First Trust Advisors, was quoted in Forbes in February 2010 as saying a shortage was coming. He based his assertion on the fact new construction has fallen off its 2007 high - fallen a lot.

Construction has not stood still. You can even find new homes going up not far from vacant and unfinished communities in Las Vegas and Arizona.

In the same, Thesis Fund Management portfolio manager Stephen Roseman said chances of a shortage were between slim and none.

It is not usual to find analysts with distinctly divergent opinions.

The question might be more aptly stated as what would suddenly turn consumer sentiment on a dime?

There has been little demand. I keep seeing stats that a third of the buying is foreclosure sales.

So, what is the story?

The market is going to be choppy - another analyst.

The market will get moving in earnest in spring - another analyst.

We're in unusual times. Since this question appeared, there was a spike in existing home sales - just as the discussion of a dreadful 2011 was picking up steam.

It was easy to divine the sudden interest in home buying. Rates shot up to 5 percent.

Don't make too much of that surge in sales. Fear chased fence-sitters out of the market. They either bought to secure a low rate or they no longer can afford to buy.

The general sentiment has not changed appreciably. There is still concern about that big jobless percentage. While the administration and stages go about their work to improve the picture, we're left to wonder if high unemployment will be the story for next several years. To me, that means the real estate market will remain sluggish except for an occasional surprise surge.

Two other factors could weigh heavily in any forecast:
1) Another record year for foreclosures and a government response.
2) If the government is harsh in its dealings with lenders - and the attorneys general say that is the picture that is developing - a welcome and significant number of modifications could slow foreclosures.

Regarding a government response, there has to be some pressure from the states to slow the foreclosures. Fewer property owners means less revenue. Struggling states are contemplating what previously was thought an impossibility: bankruptcy.

Finally, rising energy prices and congested roads could slow sales in outlying areas.

If there is a housing shortage developing, it will be uneven. New jobs in healthier local economies eventually could bring that high unemployment back to earth. There are some reports here and there of more activity and more building permits being filed.

I'm an optimist. I look at all that analysis and see a recovery taking hold sometime later this year, maybe as the summer season winds down.

Best regards,
SuZ
0 votes
John Walin, Agent, Libertyville, IL
Fri Jan 21, 2011
Joan-For clarification, Buffini said no new construction in the past three years, (2008,2009,2010) plus the 1.5/2 years from now to when they start building again makes five years. Family sizing is families having outgrown their little houses already, (like two years ago) and once they feel secure in their job, can sell their current house they will need the next category of home. Buffini wasnt saying that prices will go up, just that supply will reduce and the good inventory marketed well will sell. This will be a sideways market for the next 18 months. Foreclosures will turn the corner in 2011, however strategic default will continue to be a problem for the market. Good stuff, priced right is selling, period. All housing is local, yea, yea, yea, but to think that prices will deteriorate and 20% is nuts. Prices are down to year 2000 level, what do you think we are going back to 1985 pricing levels?

I got to get off this dang computer and show houses to a buyer this cold January afternoon in this awful market. Oh and tomorrow I am working with a different buyer listing two homes with me and buying one. I am all unicorns and pixie dust.
0 votes
Linda S. Cef…, Agent, Franklin, WI
Fri Jan 21, 2011
Joan,

I have to ask if you have ever taken a Buffini course. His methods of following up and getting referrals is fantastic and has helped many agents in our office increase their business by big numbers. And he does what he teaches to increase his own business. This is how he knows it works

Since my last post a half hour ago, I received two more referrals for listings - both as a direct result of what I learned in Buffini.

Just my thoughts.
Web Reference:  http://www.lindacefalu.com
0 votes
Michael Emery, , Minneapolis, MN
Fri Jan 21, 2011
I visited a psychic just before Thanksgiving and she told me I was going to come into a great deal of money, I would find eternal happiness and success. Boy do I plan on going back to her!

Then I went to this other psychic who told me I was going to grow old and die. She is just so wrong!

I took a motivational class some years ago (rah rah rah) where they told us 'listing is king!'. If I ascribed to that philosophy today I would have 100 listings that weren't selling. The problem with motivational speakers is they tell you what you want to hear, not what you need to hear.

As for there being a shortage of housing in two years, tell that to the folks of Cape Coral Florida.
0 votes
Linda S. Cef…, Agent, Franklin, WI
Fri Jan 21, 2011
Our office has experienced a huge increase in the flurry of activity. In addition, my personal business is going gang busters. I know that real estate is definitely local, so I don't pretend that things are coming up roses everywhere, but I am very grateful for the business that I have.

And John, I really appreciate what you said about those of us that hung in there.And I have great respect for Brian Buffini. I am looking forward to the time when I do not have to be in continuing ed on a weekly basis whether it be through an actual class, webinar or real life experience. The changes we have experienced most especially in the previous year have been somewhat mind boggling and I'm glad I got through it. I learned a lot and I'm thankful for that.

I'm not a romantic when it comes to reality, so I'm not suggesting that we can make things happen by wishing them to be. However, I do believe that positive attitude is key to attracting new business.

In my earlier response I stated, "I think the news has a way of causing some of the issues we are dealing with.", and I stand by my comment. History only repeats itself if we allow it to. I like to think that we have all learned from the past and are working tirelessly not to repeat the same mistakes.
Web Reference:  http://www.lindacefalu.com
0 votes
John Walin, Agent, Libertyville, IL
Fri Jan 21, 2011
I attended a 2 day Brian Buffini seminar before thanksgiving and he said that in two years there will be a housing shortage. Everyone in the audience did a scooby do, Rgghh?? His basis for claim is that no new construction the past five years, pent up demand and family sizing has been on hold. 2011 should clear most of the foreclosures and the economy should get better and consumer confidence rise. This bad market is great for clearing the herd! Bye bye part time agents and we active agents that can stick it out for the next year should have a stronger market and less inactive bad agents that ruin the business.
0 votes
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